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Jumbo Refinance Home loans Can Be Approved If you are Prepared
You're thinking of a jumbo loan for a home refinance while rates are low but you have been told, "Do to not waste your time applying. Not now, since the banks aren't lending!" Most banks aren't too interested in approving jumbo loans. The jumbo loans are thought high risk loan, especially in a stagnant economy. Some banks may offer jumbo loans but their underwriting process is really strict that obtaining the jumbo loan to the closing table doesn't seem possible. There are some banks that handle jumbo loan efficiently and can hold these financing options in their portfolio. Finding this type of bank may be the initial step inside your quest to have your jumbo loan refinanced. The best bank may have the widest variety of terms and have the most flexible underwriting guidelines. There are other points that needs to be considered in choosing the right bank.
Despite the inherent risks resulting from higher loan amounts, the fundamentals of home loan underwriting still apply. Like mortgage loans with amounts below $417,000, the 5 Cs of lending remain intact, (capacity, credit, capital, collateral, character.) So what's different with jumbo loan underwriting?
A residential jumbo loan is any home mortgage loan where the loan size exceeds GSE's (Government Sponsored Enterprise such as Fannie Mae and Freddie Mac) limits. Currently, the GSE's loan limits are capped at $417,000.00 or $625,500 in Alaska or Hawaii. Any home loan exceeding these limits is recognized as a jumbo loan. This is obviously the very first obvious distinction between a standard home mortgage and also the jumbo loan. With higher loan amounts comes a lesser LTV (loan to value) Expect to have at least a 20% equity position on a rate/term refinance.
The borrowed funds terms will vary from lender to lender and it is always prudent to consider a lender which has a number of options that can be tailored for your specific needs, whether you'll need a Thirty year fixed interest rate, a 15 year fixed interest rate or a 5/1, 7/1 or 10/1 hybrid ARM or interest only. The eye rates on these higher loan amounts aren't as high as some borrowers think they'd be. They generally really are a tiny bit greater than conventional mortgage rates and in some cases they might be lower than some conventional loans after their rate adjustments.
Many borrowers have unique situations and also the bank that you should use is a that has a clear knowledge of the uniqueness from the higher loan borrower. For example, although many borrowers possess a standard salary and W2 income, there's a disproportionate number in comparison with lower loan amount applicants that have a W2 income which include bonuses or commissions. With the higher loan values, there are also a bigger quantity of self employed borrowers and professionals. Different calculations ought to be used for this kind of borrower to allow for depreciation, depletion, bonuses and commissions. For a borrower's best shot at loan approval and efficiency, the higher loan amounts require a bank that has a staff of underwriters and originators who've a higher skill set and training for this type of loan origination and underwriting.
To become approved for a jumbo loan, you must be prepared with support documentation. Income documentation, documentation of reserves, letters of explanation, tax documents, etc. In a nutshell, you will need 2 yrs tax statements with all of schedules, one month's most recent pay stubs, two months newest bank statements, schedule of real estate owned, most recent statements of stocks, bonds 401k and IRA accounts. An expert loan originator who's familiar with this kind of loan will give you insight on what documents you need for the application.
